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Transcript
Compendium
An introduction to the UK national accounts
Contact:
Release date:
Emma Howley
29 July 2016
[email protected].
gov.uk
Next release:
October 2017
Table of contents
1. What is the Blue Book?
2. Overview of the UK national accounts
3. Summary of changes
4. The basic accounting framework
5. Table numbering system
6. What is an account? What is its purpose?
7. The integrated economic accounts
8. The goods and services account (Account 0)
9. Current accounts: the production and distribution of income accounts
10. Satellite accounts
11. The limits of the national economy: economic territory, residence and centre of economic interest
12. Economic activity: what production is included?
13. Prices used to value the products of economic activity
14. Gross domestic product: the concept of net and gross
15. Symbols used
Page 1 of 13
1 . What is the Blue Book?
The Blue Book was first published in August 1952 and presents a full set of economic accounts (national
accounts) for the UK. These accounts are compiled by the Office for National Statistics (ONS). They record and
describe economic activity in the UK and, as such, are used to support the formulation and monitoring of
economic and social policies.
Chapter 1
Chapter 1 of the Blue Book provides a summary of the UK national accounts, including explanations and tables
covering the main national and domestic aggregates, for example:
gross domestic product (GDP) at current market prices and chained volume measures
GDP deflator
gross value added (GVA) at basic prices
gross national income (GNI)
gross national disposable income (GNDI)
population estimates
employment estimates
GDP per head
the UK summary accounts (the goods and services account, production accounts, distribution and use of
income accounts, and accumulation accounts)
Chapter 1 also includes details of revisions to data since the Blue Book 2015.
Chapter 2
Chapter 2 includes:
input-output supply and use tables
analyses of GVA at current market prices and chained volume measures
capital formation
workforce jobs by industry
Chapters 3 to 7
Chapters 3, 4, 5, 6 and 7 provide:
Page 2 of 13
a description of the institutional sectors
the sequence of the accounts and balance sheets
an explanation of the statistical adjustment items needed to reconcile the accounts
the fullest available set of accounts providing transactions by sectors and appropriate sub-sectors of the
economy (including the rest of the world)
Chapters 8 to 11
Chapters 8, 9, 10 and 11 cover additional analysis and include:
supplementary tables for gross fixed capital formation (GFCF), national balance sheet and public sector
statistics for European Union purposes
Chapter 12
Chapter 12 covers:
UK environmental accounts
Chapter 13
Chapter 13 covers:
flow of funds
2 . Overview of the UK national accounts
In the UK priority is given to the production of a single GDP estimate using income, production and expenditure
data. Further analysis is available on the following:
income analysis at current prices
expenditure analysis at both current prices and chained volume measures
value added analysis compiled on a quarterly basis in chained volume measures only
Income, capital and financial accounts are produced for non-financial corporations, financial corporations, general
government, households and non-profit institutions serving households.
The accounts are fully integrated, but with a statistical discrepancy (known as the statistical adjustment), shown
for each sector account. This reflects the difference between the sector net borrowing or lending from the capital
account and the identified borrowing or lending in the financial accounts, which should theoretically be equal.
Page 3 of 13
Financial transactions and balance sheets are produced for the rest of the world sector in respect of its dealings
with the UK.
3 . Summary of changes
The main categories of improvements implemented in the Blue Book 2016 are:
changes required under international standards and guidelines; European System of Accounts 2010 (ESA
2010); Balance of Payments Manual 6 (BPM6) and the updated Manual on Government Deficit and Debt
changes from ensuring comparability in measuring gross national income (GNI) across European Union
countries
other methodological changes to meet user needs, including implementation of the revised methodology
for calculating imputed rental and updating the last base year and reference year from 2012 to 2013
A series of articles have been published describing the improvements and their impact in detail. The articles can
be accessed via the National Accounts article page on our website.
4 . The basic accounting framework
The accounting framework provides a systematic and detailed description of the UK economy, including sector
accounts; and the input-output framework.
All elements required to compile aggregate measures, such as gross domestic product (GDP), gross national
income (GNI), saving and the current external balance (the balance of payments) are included.
The economic accounts provide the framework for a system of volume and price indices, to allow chained volume
measures of aggregates such as GDP to be produced. In this system, value added, from the production
approach, is measured at basic prices (including other taxes less subsidies on production but not on products)
rather than at factor cost (which excludes all taxes less subsidies on production).
The whole economy is subdivided into institutional sectors with current price accounts running in sequence from
the production account through to the balance sheet.
The accounts for the whole UK economy and its counterpart, the rest of the world, follow a similar structure to the
UK sectors, although several of the rest of the world accounts are collapsed into a single account as they can
never be complete when viewed from a UK perspective.
5 . Table numbering system
The table numbering system is designed to show relationships between the UK, its sectors and the rest of the
world. For accounts drawn directly from the European System of Accounts 2010 (ESA 2010), a 3-part numbering
system is used; the first 2 digits denote the sector and the third digit denotes the ESA account. Not all sectors
can have all types of account, so the numbering is not necessarily consecutive within each sector’s chapter. The
rest of the world’s identified components of accounts 2 to 6 are given in a single account numbered 2. UK whole
economy accounts consistent with ESA 2010 are given in section 1.6 as a time series and in section 1.7 in
detailed matrix identifying all sectors, the rest of the world and the UK total.
Page 4 of 13
The ESA 2010 code for each series is shown in the left-hand column, using the following prefixes:
S for the classification of institutional sectors
P for transactions in products
D for distributive transactions
F for transactions in financial assets and liabilities
K for other changes in assets
B for balancing items and net worth
Within the financial balance sheets, the following prefixes are used:
AF for financial assets and liabilities
AN for non-financial assets and liabilities
6 . What is an account? What is its purpose?
An account records and displays all flows and stocks for a given aspect of economic life. The sum of resources is
equal to the sum of uses, with a balancing item to ensure this equality.
The system of economic accounts allows the build-up of accounts for different areas of the economy, highlighting
–for example – production, income and financial transactions.
Accounts may be elaborated and set out for different institutional units or sectors (groups of units).
Usually a balancing item has to be introduced between the total resources and total uses of these units or
sectors. When summed across the whole economy these balancing items constitute significant aggregates.
Table I.1 provides the structure of the accounts and shows how GDP estimates are derived as the balancing
items.
7 . The integrated economic accounts
The integrated economic accounts of the UK provide an overall view of the economy. Table I.1 presents a
summary view of the accounts, balancing items and main aggregates and shows how they are expressed. The
accounts are grouped into 4 main categories:
goods and services accounts
current accounts
accumulation accounts
balance sheets
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8 . The goods and services account (Account 0)
The goods and services account is a transactions account, balancing total resources, from outputs and imports,
against the uses of these resources in consumption, investment, inventories and exports. No balancing item is
required as the resources are simply balanced with the uses.
9 . Current accounts: the production and distribution of
income accounts
The production account (Account I)
This account displays transactions involved in the generation of income by the activity of producing goods and
services. The balancing item is value added (B.1). For the nation’s accounts, the balancing items (the sum of
value added for all industries) is, after the addition of taxes less subsidies on products, GDP at market prices or
net domestic product when measured net of capital consumption. The production accounts are also shown for
each industrial sector.
The distribution and use of income accounts (Account II)
This account shows the distribution of current income (value added) carried forward from the production account
and has saving as its balancing item (B.8). Saving is the difference between income (disposable income) and
expenditure (or final consumption).
The distribution of income compromises of 3 sub-accounts:
primary distribution of income
secondary distribution of income
redistribution of income in kind
The primary distribution of income account
Primary incomes are accrued to institutional units because of their involvement in production or their ownership of
productive assets. They include the following:
property income (from lending or renting assets)
taxes on production and imports
The following are excluded:
taxes on income or wealth
social contributions or benefits
other current transfers
Page 6 of 13
The primary distribution of income shows the way these are distributed among institutional units and sectors. The
primary distribution account is divided into 2 sub-accounts – the generation and the allocation of primary incomes.
The secondary distribution of income account
This account shows how the balance of primary incomes for an institutional unit or sector is transformed into its
disposable income by the receipt and payment of current transfers (excluding social transfers in kind). The 2
further sub-accounts (the use of disposable income and the use of adjusted disposable income) look at the use of
income for either consumption or saving.
The redistribution of income in kind
This account shows how gross disposable income of households and non-profit institutions serving households
and government are transformed by the receipt and payment of transfers in kind. The balancing item for this
account is adjusted gross disposable income (B.7g).
The accumulation accounts (Accounts III and IV)
These accounts cover all changes in assets, liabilities and net worth. The accounts are structured into 2 groups.
The first group covers transactions that would correspond to all changes in assets, liabilities and net worth which
result from transactions, and are known as the capital account and the financial account. They are distinguished
to show the balancing item net lending/borrowing.
The second group relates to all changes in assets, liabilities and net worth owing to other factors, for example,
the discovery or re-evaluation of mineral reserves, or the reclassification of a body from 1 sector to another.
Capital account (Account III.1)
This account concerns the acquisition of non-financial assets (income creating or wealth only) such as fixed
assets or inventories, financed out of saving, and capital transfers involving the redistribution of wealth. Capital
transfers include, for example, capital grants from private corporations to public corporations.
The account shows how savings finance investment in the economy. In addition to gross fixed capital formation
and changes in inventories, it shows the redistribution of capital assets between sectors of the economy and the
rest of the world. If the balance on the account is negative, it is designated net borrowing and measures the net
amount a unit or sector is obliged to borrow from others. If positive, the balance is described as net lending and
measures the amount the UK or a sector has available to lend to others. This balance is also referred to as the
financial surplus or deficit, and the net aggregate for the 5 sectors of the economy equals net lending or
borrowing from the rest of the world.
Financial account (Account III.2)
This account shows how net lending and borrowing are achieved by transactions in financial instruments. The net
acquisitions of financial assets are shown separately from the net incurrence of liabilities. The balancing item is
net lending or borrowing.
In principle, net lending or borrowing should be identical for both the capital account and the financial account. In
practice, however, because of errors and omissions this identity is very difficult to achieve for the sectors and the
economy as a whole. The difference is known as a statistical adjustment.
Page 7 of 13
The balance sheet (Account IV)
The second group of accumulation accounts complete the sequence of accounts. These include the balance
sheets and a reconciliation of the changes that have brought about the change in net worth between the
beginning and end of the accounting period.
The opening and closing balance sheets show how total holdings of assets by the UK or its sectors match total
liabilities and net worth (the balancing item). Various types of assets and liabilities can be shown in detailed
presentations of the balance sheets. Changes between the opening and closing balance sheets for each group of
assets and liabilities result from transactions and other flows recorded in the accumulation accounts, or
reclassifications and revaluations.
Net worth
equals
changes in assets
less
changes in liabilities.
The rest of the world account (Account V)
This account covers the transactions between resident and non-resident institutional units and the related stocks
of assets and liabilities. Written from the point of view of the rest of the world, its role is similar to an institutional
sector.
10 . Satellite accounts
Satellite accounts cover areas or activities not included in the central framework because they either add
additional detail to an already complex system or conflict with the conceptual framework. The UK environmental
accounts are satellite accounts linking environmental and economic data to show the interactions between the
economy and the environment.
See UK Environmental Accounts: 2016 for further information.
11 . The limits of the national economy: economic territory,
residence and centre of economic interest
Economic territory and residence of economic interest
The economy of the UK is made up of institutional units which have a centre of economic interest in the UK
economic territory. These units are known as resident units and it is their transactions which are recorded in the
UK national accounts.
UK economic territory
The UK economic territory includes:
Page 8 of 13
Great Britain and Northern Ireland (the geographic territory administered by the UK government within
which persons, goods, services and capital move freely)
any free zones, including bonded warehouses and factories under UK customs control
the national airspace, UK territorial waters and the UK sector of the continental shelf
The UK economic territory excludes Crown dependencies (Channel Islands and the Isle of Man).
ESA 2010 economic territory
Within the European System of Accounts 2010 (ESA 2010), the definition of economic territory also includes:
territorial enclaves in the rest of the world (embassies, military bases, scientific stations, information or
immigration offices and aid agencies used by the British government with the formal political agreement of
the governments in which these units are located)
But it excludes:
any extra territorial enclaves (that is, parts of the UK geographic territory like embassies and US military
bases used by general government agencies of other countries, by the institutions of the European Union
or by international organisations under treaties or by agreement)
Centre of economic interest
When an institutional unit engages and intends to continue engaging (normally for 1 year or more) in economic
activities on a significant scale from a location (dwelling or place of production) within the UK economic territory, it
is defined as having a centre of economic interest and is a resident of the UK.
If a unit conducts transactions on the economic territory of several countries, it has a centre of economic interest
in each of them. Ownership of land and structures in the UK is enough to qualify the owner to have a centre of
interest in the UK.
Ownership of land and structures in the UK is enough to qualify the owner to have a centre of interest in the UK.
Residency
Resident units are:
households
legal and social entities such as corporations and quasi corporations, for example, branches of foreign
investors
non-profit institutions
government
so-called “notional residents”
Page 9 of 13
Travellers, cross-border and seasonal workers, crews of ships and aircraft, and students studying overseas are
all residents of their home countries and remain members of their households.
When an individual leaves the UK for 1 year or more (excluding students and patients receiving medical
treatment), they cease being a member of a resident household and become a non-resident, even on home visits.
12 . Economic activity: what production is included?
Gross domestic product (GDP) is defined as the sum of all economic activity taking place in UK territory. In
practice a “production boundary” is defined, inside which are all the economic activities taken to contribute to
economic performance. To decide whether to include a particular activity within the production boundary, the
following factors are considered:
does the activity produce a useful output?
is the product or activity marketable and does it have a market value?
if the product does not have a meaningful market value, can one be assigned (imputed)?
would exclusion (or inclusion) of the product of the activity make comparisons between countries over time
more meaningful?
The following are recorded within the ESA 2010 production boundary:
production of individual and collective services by government
own-account production of housing services by owner-occupiers
production of goods for own final consumption, for example, agricultural products
own-account construction, including that by households
production of services by paid domestic staff
breeding of fish in fish farms
production forbidden by law; as long as all units involved in the transaction enter into it voluntarily
production from which the revenues are not declared in full to the fiscal authorities, for example,
clandestine production of textiles
The following fall outside the production boundary:
domestic and personal services produced and consumed within the same household, for example,
cleaning, the preparation of meals or the care of sick or elderly people
volunteer services that do not lead to the production of goods, for example, caretaking and cleaning without
payment
natural breeding of fish in open seas
(European System of Accounts ESA 2010 (2013) paragraphs 1.29 and 1.30)
Page 10 of 13
13 . Prices used to value the products of economic activity
In the UK, a number of different prices may be used to value inputs, outputs and purchases. The prices are
different depending on the perception of the bodies engaged in the transaction– that is, the producer and user of
a product will usually perceive the value of the product differently, with the result that the output prices received
by producers can be distinguished from the prices paid by producers.
Basic prices
Basic prices are the preferred method of valuing output in the accounts.
They are the amount received by the producer for a unit of goods or services
minus any taxes payable
plus
any subsidy receivable as a consequence of production or sale.
The only taxes included in the price will be taxes on the output process– for example, business rates and vehicle
excise duty, which are not specifically levied on the production of a unit of output. Basic prices exclude any
transport charges invoiced separately by the producer. When a valuation at basic prices is not feasible,
producers’ prices may be used.
Producers’ prices
Producers’ prices are basic prices
plus
those taxes paid per unit of output (other than taxes deductible by the purchaser such as VAT, invoiced for output
sold)
minus
any subsidies received per unit of output.
Purchasers’ or market prices
Purchasers’ or market prices are the prices paid by the purchaser and include transport costs, trade margins and
taxes (unless the taxes are deductible by the purchaser).
Purchasers’ or market prices are producers’ prices
plus
any non-deductible VAT or similar tax payable by the purchaser
plus
transport costs paid separately by the purchaser (not included in the producers’ price).
They are also referred to as “market prices”.
The rest of the world: national and domestic
Domestic product (or income) includes production (or primary incomes generated and distributed) resulting from
all activities taking place “at home” or in the UK domestic territory.
Page 11 of 13
This will include production by any foreign-owned company in the UK, but exclude any income earned by UK
residents from production taking place outside the domestic territory.
GDP
equals
the sum of primary incomes distributed by resident producer prices.
The definition of GNI (gross national income) is gross domestic product (GDP) plus income received from other
countries (notably interest and dividends), less similar payments made to other countries.
GDP
plus
net property income
equals
GNI.
This can be introduced by considering the primary incomes distributed by the resident producer units. Primary
incomes, generated in the production activity of resident producer units, are distributed mostly to other residents’
institutional units. For example, when a resident producer unit is owned by a foreign company, some of the
primary incomes generated by the producer unit are likely to be paid abroad. Similarly, some primary incomes
generated in the rest of the world may go to resident units. It is therefore necessary to exclude that part of
resident producers’ primary income paid abroad, but include the primary incomes generated abroad but paid to
resident units.
GDP (or income)
less
primary incomes payable to non-resident units
plus
primary incomes receivable from the rest of the world
equals
GNI.
GNI at market prices
equals
the sum of gross primary incomes receivable by resident institutional units or sectors.
National income includes income earned by residents of the national territory, remitted (or deemed to be remitted
in the case of direct investment) to the national territory, no matter where the income is earned.
Real GDP (chained volume measures)
plus
trading gain
equals
real gross domestic income (RGDI).
Real gross domestic income (RGDI)
plus
real primary incomes receivable from abroad
less
real primary incomes payable abroad
equals
real gross national income (real GNI).
Page 12 of 13
Real GNI (chained volume measures)
plus
real current transfers from abroad
less
real current transfers abroad
equals
real gross national disposable income (GNDI).
Receivables and transfers of primary incomes, and transfers to and from abroad, are deflated using the gross
domestic final expenditure deflator.
14 . Gross domestic product: the concept of net and gross
The term gross means that, when measuring domestic production, capital consumption or depreciation has not
been allowed for.
Capital goods are different from the materials and fuels used up in the production process because they are not
used up in the period of account but are instrumental in allowing that process to take place. However, over time,
capital goods wear out or become obsolete and in this sense GDP does not give a true picture of value added in
the economy. When calculating value added as the difference between output and costs, we should also show
that part of the capital goods are used up during the production process (the depreciation of capital assets).
Net concepts are net of this capital depreciation, for example:
GDP
minus
consumption of fixed capital
equals
net domestic product.
15 . Symbols used
In general, the following symbols are used:
.. not available
nil or less than £500,000
£ billion denotes £1,000 million
Page 13 of 13